In the absence of the UK Parliament providing pensions news, attention turns to the European Parliament and the Committee of Inquiry into the collapse of Equitable Life.
Pensions is just one of those topics you can’t escape from - and if you’re honest you probably don’t really want to – but in this case it is an ongoing issue which has so far lasted for around seven years.
Now I know pensions are a long-term investment but this is ridiculous!
Equitable shut its doors in 2000 and since then it has been an ongoing round of court cases, reports and inquiries and the latest in a long line is the draft report from the EU’s Committee of Inquiry, which was released at the end of March.
Since then, a number of meetings by the Committee to discuss the recommendations and amendments has led to a row between Conservative and Labour MEPs on the Committee, with accusations of Labour members trying to ‘wreck’ the report in an effort to protect the British government.
However, along the way the reports and the accusations seem to be obscuring the important conclusions of the document - which is that the UK regulatory regime and the UK government played a significant part in the collapse of the insurer.
Diana Wallis, the Liberal Democrat MEP, and Rapporteur of the Committee who wrote the 373-page report, claims the reputation of Equitable meant the regulators provided “excessive leniency” over its solvency margins, while the regulators’ “undue ‘awe’ or ‘deference’” towards the company was another important factor.
The report also condemns the Financial Ombudsman Service (FOS) as “ineffective” in its response to claims for compensation from Equitable members, and argues many victims “had great difficulty in knowing what route to take or who to apply to in trying to make a complaint and obtain redress” resulting in “a pattern of confusion and much inequality of treatment” as taking the matter to court was an option available to “only a few affluent policyholders”.
As a result, the Committee says the UK government is “under an obligation to assume responsibility" for compensation, but as the Committee has no power to force the government to cough up, I’m not sure what effect this report will have in reality.
Within the UK, the government has already ignored the findings of two independent reports and a judicial review which have found it guilty of maladministration and mis-leading 125,000 pensioners over the safety of occupational pension schemes.
Even now the government is appealing the court ruling, and has only marginally increased the compensation fund of the Financial Assistance Scheme after continued pressure from pension campaigners and MPs of all parties.
So while the findings of the report may provide Equitable Life members with a small feeling of vindication in knowing the government and the regulators were partly to blame for the disaster – what can they actually expect as a result?
The ‘urging’ of a Committee with no power to enforce their recommendations, is not likely to convince Gordon Brown to put his hand in his pocket, while the impending second report in the issue from the Parliamentary Ombudsman is not likely to make a significant impact anywhere but in the press.
The findings of the reports may make good headlines, and inspire hope in members for a short time, but in reality unless it can guarantee votes and his place in Number 10, it is unlikely the situation of the members is going to encourage Gordon to be generous.
Ann Abrahams’ second report, which has been delayed at least twice, is expected to be published in May with rumours suggesting she too will severely criticise the government and the regulators for failing to adequately protect consumers.
But as the government has already dismissed out of hand one of her reports which criticised the State and recommended compensation to pensioners, what are the chances that this time they’ll listen?
If I was at all suspicious I might wonder whether the government dismissed Abrahams occupational pensions report as a precedent for dismissing the impending Equitable findings – but they wouldn’t do that, would they?
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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